Typically this correlation is negative - bonds go up (rates down) in times of risk aversion; and stocks go down. The opposite is also true - bonds go down (rates up) in times of risk taking; and stocks go up. But that correlation hasn't been as tight as some may expect lately. A look at the chart below may, however, still offer some clues about future price action.

Starting about the end of last year, stock prices ran higher; but bond prices did not react proportionately by falling lower. Instead, bonds moved sideways. Not until March of this year did bonds breakdown sharply, seemingly admitting defeat to the risk appetite that was driving stocks higher.

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